Does Apple Pay Have to Catch PayPal or Starbucks?

Apple Pay in November 2014  was responsible for one percent of digital payment transaction volume (measured by dollar amount), according to ITG Investment Research.

Google Wallet, which launched in 2011, accounted for four percent of digital payment transaction volume in November 2014.

Apple Pay could pose a major threat to market leader PayPal's current dominance of the mobile payment space, according to Steve Weinstein, ITG senior Internet analyst. PayPal was used by close to half of online consumers in 2012, so the trick is to leverage that position in the proximity payments business (retail store checkout).

In September 2014, excluding Starbucks, PayPal had about 60 percent share of mobile wallet share, followed by Google Wallet at 43 percent.  

In the near term, it is Starbucks that Apple Pay might have to displace, even though Starbucks presently is a “captive” system, while Apple Pay aims to be a general purpose payment system.

“In 2013, payment for purchases by use of all mobile devices in the US totalled $1.3 billion, that was the entire market,” said Starbucks CEO Howard Schultz. “With over 90 percent of those purchases taking place in a Starbucks store, that means we had 90 percent share of mobile payments in 2013 while brick-and-mortar commerce in 2013 totalled more than $4.2 trillion.”

That language suggests Starbucks might eventually leverage its mobile payment system on a larger scale. “Starbucks Coffee Company has cracked the code at tying mobile payments to loyalty and we are now receiving great interest in partnerships from mobile payment companies who see the value of our rewards program and the mobile payment behaviour we established,” said Schultz.

“I can assure you that Starbucks will have a major role to play, both inside and outside of our stores, as the nascent mobile payment industry evolves,” Schulz said.

About 60 percent of new Apple Pay customers used Apple Pay on multiple days through November.

New PayPal customers used the service on multiple days during the same time period just 20 percent of the time, ITG notes.

Apple Pay customers used the service roughly 1.4 times per week and used Apple Pay at the same merchant for future transactions roughly 66 percent of the time.

Apple Pay users employ the service for 5.3 percent of all card transactions and 2.3 percent of all future card transaction volume, the study found.

Apple Pay Retailer Share of Apple Pay Activity
Rank	Merchant	Transaction %	Dollar %
1	WHOLE FOODS	20%	28%
2	WALGREENS	19%	12%
3	MCDONALD'S	11%	3%
4	PANERA BREAD	6%	2%
5	SUBWAY	3%	1%
	Top 5	58%	45%